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Old 11-09-2011, 04:28 PM
 
28,461 posts, read 76,326,507 times
Reputation: 18536

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Really interesting admission of having much better hindsight than forethought:

http://www.nytimes.com/2011/11/09/bu...pagewanted=all

Not sure I would buy the guy's book, but I will look for it at the library...

Wonder how many other "advisors" would have signed up for a negative amortization loaned AND a HELOC? Living on a dream!

Sounds like he is back on his feet, largely because he had family to back stop his foolishness, I suspect few folks in his position would admit that is how they stopped their slide.

At least he seems to learn some lessons...
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Old 11-09-2011, 07:10 PM
 
3,578 posts, read 6,330,177 times
Reputation: 1433
There are no lessons learned.

History will repeat itself. The article is very misleading. It says he purchased in 2003 for 575k. And he "short sold" in 2010 for 500k or something like that. He probably owed closed to $800-900k because he had home equity and started doing a negative amortization loan. But the article did not disclose how much he stiffed the banks.

Frankly I am not sure how he has even stayed in business as a financial consultant. A financial advisor with anytype of short sale or foreclosure should be reprimanded by their individual state board licensing agency. Similar to a doctor or lawyer with their state boards.

When I say history repeats itself, people or corps. always over leverage and that is how they run into trouble quickly. Lets see, Lehman was 60 to 1 in debt. They hold congressional meetings saying this should never happen. What just happened with MF Global? They were 40 to 1 over leveraged.
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Old 11-10-2011, 02:33 PM
 
Location: Albuquerque
5,548 posts, read 14,809,776 times
Reputation: 2731
Quote:
Originally Posted by aneftp
There are no lessons learned.
Yet there are lessons.

The lesson isn't that real estate prices can go down.

The lesson is that investing with leverage is dangerous. In the article, the
guy mentions people who made good money who are in financial danger due
to real estate investment that went sour. ( Investment-s- plural, that is. )

I remember the dot-com bubble and seeing people losing their shirts even
before the bubble burst. When you borrow money and get margin calls,
you can get wiped-out from a short-term dip.

Buying a home with a mortgage is a leveraged investment in real estate.
People come on this forum stating that it is not an investment, but
it is. It's the biggest investment in most people's lives. It's likely the only
leveraged investment in most people's lives and they are not even aware of it.

Doing a short sale or walking away is kinda like getting the margin call you cannot afford.

It's too bad there weren't rules in place limiting the amount of borrowing one
could do as there are with brokerage accounts. They would have had to be
different, but things like minimum down-payments, no cash-out loans to pay
credit cards, buy automobiles. Home improvements - OK- but only, say 50% ...
.... stuff like that would have been nice ...

I'd like to add one more thing: The guy was/is a financial advisor.
It even states he is a CFA. Lots of doctors smoke, too.
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Old 11-10-2011, 03:19 PM
 
Location: Baltimore, MD
3,879 posts, read 7,683,532 times
Reputation: 5147
Great article! I may check out the book at some point.
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Old 11-11-2011, 01:30 AM
 
484 posts, read 1,445,209 times
Reputation: 1448
Great story. It succinctly describes the dilemma we are in with the economy. In 2002-2007, the housing bubble created enormous wealth, which people borrowed against. That easy credit caused money supply to expand which fueled the economy. The 2002-2007 economy basically stole demand from future years, which we are living in now.

When you had an economy that was fueled by debt-driven consumption instead of by technology/productivity gains, you weren't really growing. The growth from 2002-2007 was not real; it was just stolen from 2008-2013.
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Old 11-11-2011, 02:12 PM
 
3,398 posts, read 4,609,926 times
Reputation: 2413
Interesting article. I will never depend on a financial adviser.
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